AP Moller-Maersk has launched a new share buy-back programme of DKK 10bn ($1.6bn) following another stellar quarter.
The Danish shipping giant will acquire a first tranche of $500m in shares starting December, with the remainder to be purchased over a 15-month period.
The decision is supported by strong earnings and free cash-flow generation seen in 2020, the company said.
That had led to further deleveraging and an improved credit rating.
The company will acquire a maximum of 1.79m shares, if it receives approval at the annual general meeting in March 2021.
Stellar quarter
Maersk unveiled the buy-back effort as it reported a sharp rise in earnings in the third quarter.
Group Ebitda grew to $2.3bn, a 39% jump compared to the same period of 2019, while net profit rose to $947m from $520m a year earlier.
That came despite a drop in revenues of 1.4% to $9.9bn.
That was due to stringent costs control and agile capacity management of its liner operations.
Shipping contributed the bulk of that improvement, despite decreasing volumes of 3.6%.
Maersk's ocean division saw profitability increase $511m to $1.8bn in the third quarter of the year.
That was a result of continued agile capacity deployment, lower costs, and a temporary spike in short-term rates due to a sudden demand pick-up on some routes.
The company highlighted a further uptake of digital services and benefits from demand recovery compared to the second quarter.
Uncertainty remains
Chief executive Soren Skou pointed to a strong free cash-flow despite the negative impact on global economies of the Covid-19 pandemic.
The free cash-flow generation of $3bn in the first nine months of 2020, allowed the company to return cash to shareholders and finance acquisitions.
It helped reduce net interest-bearing debt decreasing to $10.8bn by the end of the third quarter, compared to $11.7bn by the end of 2019.
“Throughout the pandemic, our main priorities have been keeping our employees safe, keeping our global network and ports operating to serve our customers and supporting the societies we are part of. This continues to be our focus as demand has begun to partially recover,” Skou said.
“Our progress in earnings and in our transformation allows us to look confidently past the extraordinary 2020, however we remain well aware of the high level of uncertainty the pandemic and associated lock downs continue to pose in the coming quarters.”
Cash return on invested capital (CROIC) over the last twelve months increased from 9.9% to 13.9% due to stronger cash flow from operating activities and lower gross capital expenses.
Forecast upgrade
The results are unlikely to shock analysts after Maersk upgraded its earnings forecast for the full year on 17 November.
The company expects Ebitda for the whole of 2020 in the range of $8bn and $8.5bn, before restructuring and integration costs.
That compares with a forecast in October of between $7.5bn and $8bn, having earlier in the year projected earnings as low as $6bn.
The improved outlook is due increased momentum in global container volumes and freight rates during the ongoing fourth quarter.
